2017 Legislative Session Update

The following bills, which were passed during the 85th Regular Legislative Session, impact procedures, filings, or other duties and responsibilities of the Business & Public Filings Division. The text of all bills, including fiscal notes and bill analyses, are maintained at Texas Legislature Online.

Business Filings Legislation

HB 1646 amends chapter 71 of the Business & Commerce Code, also known as the Assumed Business or Professional Name Act. The amendments permit a county clerk to waive filing fees for an assumed name certificate, renewal of assumed name certificate, and statement of abandonment of assumed name certificate made on the county level. The Act permits a county clerk to waive the filing fees for a registrant who is a "military veteran" as defined by section 55.001 of the Occupations Code. Please note that the changes made by HB 1646 apply only to county level filings. HB 1646 does not impact fees established and collected by the secretary of state for assumed name certificate filings submitted to our office.

In 2013, the Texas Legislature authorized the formation of captive insurance companies in Texas by enacting chapter 964 of the Insurance Code. The certificate of formation for a captive insurance company is filed with the secretary of state. When initially enacted, chapter 964 of the Insurance Code made any information provided to the secretary under that chapter confidential unless specifically waived by the applicant/company.

HB 1944 amends chapter 964 to simplify the formation process with the secretary of state and to facilitate the formation of captive insurance companies. The bill amends section 964.070 to provide that only information filed by an applicant or captive insurance company with the commissioner of insurance, rather than any information filed with the secretary of state, is confidential. Section 964.070 was amended to authorize the secretary of state to index in the public record any document filed with the secretary by an applicant or captive insurance company. Although HB 1944 was effective on signing, the act provides that the change in law made by the amendment to section 964.070 applies only to information that is filed with the secretary of state on or after September 1, 2017. Any information filed with the secretary of state before September 1, 2017, is governed by the law in effect before the effective date of the act.

HB 2856 changes the business entity name standard for domestic and foreign filing entities. Currently, chapter 5 of the Business Organizations Code (BOC) does not permit a domestic or foreign filing entity name to be the same as, deceptively similar to, or similar to the name of an existing filing entity, name reservation or name registration on file with the secretary of state. A name that is similar may be permitted if a notarized written consent is provided by the existing entity or name reservation/registration registrant with the conflicting name. HB 2856 changes the entity name standard to require an entity name to be “distinguishable on the record” which is the name standard more frequently encountered in other jurisdictions.

HB 3488 authorizes the formation of a public benefit corporation. A public benefit corporation is a for-profit corporation formed for the purpose of producing a public benefit or benefits and that is managed in a manner that balances the shareholders’ pecuniary interests; the best interests of those persons materially affected by the corporation’s conduct; and the public benefit or benefits specified in the corporation’s certificate of formation.

HB 3488 adds new subchapter S to chapter 21 of the BOC, which sets forth the specific provisions that apply to and govern a public benefit corporation. A “public benefit” is defined as “a positive effect, or a reduction of a negative effect, on one or more categories of persons, entities, communities, or interests, other than shareholders in their capacities as shareholders, including effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific, or technological nature.”

The certificate of formation of a public benefit corporation must include (1) one or more specific public benefits to be promoted by the corporation and (2) a statement that the filing entity is a for-profit corporation electing to be a public benefit corporation. Section 21.953 permits, but does not require, the name of a public benefit corporation to contain the words “public benefit corporation” or to include the abbreviation “P.B.C.” or the designation “PBC.” The secretary of state has not developed a form for the creation of a public benefit corporation.

SB 679 authorizes chiropractors to jointly form and jointly own a professional association or a professional limited liability company (PLLC) with persons who are licensed as doctors of medicine and persons licensed as doctors of osteopathy by the Texas Medical Board, as well as persons licensed as podiatrists by the Texas State Board of Podiatric Medical Examiners.

SB 1517 amends certain provisions in the BOC with respect to limited liability companies and limited partnerships. The bill amends the definition of "person" to clarify that the term includes the series of a domestic limited liability company or foreign entity, and amends section 101.605 to explicitly state that a series has the power to be an owner, organizer, or manager of an organization. The bill also clarifies that the provisions of sections 4.007 and 4.008, which impose criminal and civil penalties with respect to a false or fraudulent filing, apply to a written notarized consent to use of a similar name that may be provided by a person in connection with a filing instrument.

Chapter 5 of the BOC was amended to add subchapter F-1, which sets forth specific provisions relating to service of process on an established series of a domestic or foreign limited liability company. Additionally, SB 1517 amended chapter 101 to add Section 101.503, which imposes a civil penalty on an LLC that refuses to allow a member, who has made a written request, to examine and copy the books and records of the LLC. New section 101.503 makes the LLC liable to the member for any cost or expense, including attorney's fees, incurred in enforcing the member’s rights to examine and copy the books and records. The bill similarly amends chapter 153 to provide a civil penalty for a limited partnership's refusal to allow a partner or an assignee of a partnership interest to examine and copy the books and records of the partnership.

SB 1518 amends the BOC with respect to certain provisions that relate primarily to corporations and unincorporated nonprofit associations. The bill makes amendments to chapters 10 and 252 to authorize an unincorporated nonprofit association to effect a merger or a conversion by complying with the applicable provisions of chapter 10 and its governing documents. These new authorized transactions are subject to the same restrictions and limitations currently imposed on nonprofit corporation mergers and conversions. The bill makes conforming amendments to section 4.159 to establish fees for the new filing transactions.

The bill also includes amendments that clarify the procedures and filing requirements of a certificate of validation, which is an instrument that is filed after a for-profit corporation’s board of directors and shareholders have approved the ratification of certain defective corporate acts. Amendments clarify the information that is to be contained in a certificate of validation and set forth the circumstances that may require the attachment of an additional filing instrument. The bill also amends section 4.152 to specify the fees to be assessed for filing a certificate of validation.

Other amendments made by SB 1518 include amendments to add provisions that clarify the existence and periods of duration of certain for-profit corporations formed before September 6, 1955 and certain nonprofit corporations formed before August 10, 1959.

Other Legislation of Interest

HB 1217 amends chapter 406 of the Government Code to establish a separate commissioning process for an "online notary public." An applicant to become an online notary public must already be a commissioned notary public in this state, or must simultaneously submit an application and bond to be appointed as a notary public under chapter 406, subchapter A in addition to submitting an application to be appointed as an online notary public under new subchapter C. The application to be an online notary public is required to be submitted to the secretary of state electronically.

HB 1217 authorizes the commissioning of online notaries public who have specific authorization for performing remote electronic notarizations within defined guidelines. In addition to the authority currently granted to notaries public, online notaries public will be specifically authorized to notarize documents in digital form with an electronic signature, and they will be able to use video and audio conference technology to establish the identity of the signing party and conduct remote notarizations.

SB 2065 makes amendments to various laws that relate to the licensing and regulation of certain occupations and activities. Article 16 of SB 2065 amends Section 16.051(a) of the Business & Commerce Code to provide that a mark that depicts, comprises, or simulates the seal or the geographic outline of the United States, a state, a municipality, or a foreign nation cannot be registered. Previously, these elements would have required a disclaimer; however, on and after September 1, 2017, any mark containing these elements will not be registrable.